Lay That Pistol Down

Still limping from the effects of President Kennedy's assault on the steel companies, the stock market was making a feeble attempt to rally. Then, shortly after 2 p.m., the news was flashed that a federal grand jury in New York had indicted U.S. Steel and three other companies on antitrust charges. The market broke, with steels leading the way down; U.S. Steel fell to 58, its lowest price since early 1958.

The market reaction was instinctive: Wall Streeters naturally interpreted the indictment as a vindictive Administration follow-up to the steel-price struggle of a fortnight before. But the Administration denied that there was any connection--and the facts seemed to bear out the denial. At the height of the price fight, Bobby Kennedy's Justice Department did set in motion a grand jury probe of steel pricing, but that investigation is just getting started. The Justice Department investigation that led to last week's indictment started more than a year ago, in March 1961, shortly after the new Administration took office.

Conspiracy. Named as defendants in the indictment, besides Roger Blough's U.S. Steel Corp., were Bethlehem Steel Corp., Erie Forge & Steel Corp., Philadelphia's Midvale-Heppenstall Co., and five officers of these corporations, plus a steel trade association. In addition, "various corporations and persons not made defendants in this indictment participated as co-conspirators.'' If convicted, the individual defendants could be imprisoned for up to one year and fined as much as $50,000 apiece; each corporation could be fined $50,000.

From 1948 to March 1961, charged the indictment, various defendants conspired, in violation of the Sherman Act. to fix prices and rig bids on "open-die steel forgings" (large steel shapes, mostly shafts and axles, formed by hammering or pressing the metal rather than by rolling or casting). Some of the fixing and rigging sessions took place at meetings of a New York outfit called the Open Die Forging Institute, according to the indictment, and at these meetings the institute's secretary was excused, "with the result that the minutes did not reflect such discussions." The conspiracy led to artificially high prices on forgings sold to the Navy, the Army and certain private firms.

Moral. The case involved several ironies. Among the customers allegedly injured were General Electric, Westinghouse and Allis-Chalmers, all of which were fined in 1961 for similar antitrust violations in rigging prices of electrical equipment. For the forging makers, the crimes (if crimes were committed) did not pay: Erie Forge suffered a net loss over the past three years, and U.S. Steel reported that during the past five years it has failed to make any profit on forgings. And considering that the steel companies were widely charged with inept timing in their abortive attempt to raise prices, it seemed ironical, too, that the timing of the grand-jury indictment was so awkward, reinforcing already deep suspicions and thumping an already bruised stock market.

According to some White House insiders, President Kennedy, foreseeing that the indictment would stir suspicions among businessmen, tried to hold it off for a while, but could delay it only a short time because a grand jury, once authorized, is completely and entirely its own agent and should be free of any interference, especially from the executive branch. If the White House account is true, then Wall Street's reaction to the indictment points a moral for President Kennedy: once a man draws a pistol in a hotheaded outburst, he will for a while afterward arouse alarm every time he reaches for his handkerchief.

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